Correlation Between 70082LAB3 and Small Cap

Can any of the company-specific risk be diversified away by investing in both 70082LAB3 and Small Cap at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining 70082LAB3 and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US70082LAB36 and Small Cap Core, you can compare the effects of market volatilities on 70082LAB3 and Small Cap and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in 70082LAB3 with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of 70082LAB3 and Small Cap.

Diversification Opportunities for 70082LAB3 and Small Cap

0.1

Correlation Coefficient

70082LAB3  Small Cap

Average diversification

The 3 months correlation between 70082LAB3 and Small is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding US70082LAB36 and Small Cap Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Core and 70082LAB3 is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on US70082LAB36 are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Core has no effect on the direction of 70082LAB3 i.e., 70082LAB3 and Small Cap go up and down completely randomly.

Pair Corralation between 70082LAB3 and Small Cap

Assuming the 90 days trading horizon US70082LAB36 is expected to generate 0.57 times more return on investment than Small Cap. However, US70082LAB36 is 1.77 times less risky than Small Cap. It trades about 0.24 of its potential returns per unit of risk. Small Cap Core is currently generating about -0.37 per unit of risk. If you would invest  8,538  in US70082LAB36 on September 30, 2024 and sell it today you would earn a total of  462.00  from holding US70082LAB36 or generate 5.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	71.43%
Values	Daily Returns

US70082LAB36  vs.  Small Cap Core

US70082LAB36

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in US70082LAB36 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, 70082LAB3 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Small Cap Core

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Cap Core has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with 70082LAB3 and Small Cap

The main advantage of trading using opposite 70082LAB3 and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 70082LAB3 position performs unexpectedly, Small Cap can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Small Cap will offset losses from the drop in Small Cap's long position.

The idea behind US70082LAB36 and Small Cap Core pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.